Private Equity Russia

Russian contextual advertising agency iConText estimates that the volume of the online contextual advertising market in Russia in 2009 was 9.61 billion rubles before VAT, a 13% growth in ruble terms over the previous year (8.5 billion rubles in 2008).

In dollar terms, the total market size was down about 7% to $320 million from $344 million in 2008.

According to its report, revenues of Yandex.Direct, were 7.5 billion rubles, or 78% of the total contextual advertising market.

Besides Yandex there are two other players on the Russian contextual advertising market - Google, with an estimated 10% market share and revenues  of 1.01 billion rubles (a 50% increase over 2008) and “Begun” («Бегун») with 11% market share and revenues of 1.10 billion rubles.

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Several sources this week are reporting the size of the Russian display advertising market grew 10% in 2009 to $261 million.  We’re not so sure.

The original story was pulled from a Feb. 2009 press release from Russian digital marketing agency AdWatch, which reported impressive 2008 growth in online ATL advertising to $207 million (35% over 2007).  The press release went on to  forecast 25% growth in 2009, which would bring the size of the market up to $261 million.

Our first reaction to this would be that 2009 probably didn’t go as planned.

That being said, global figures for online advertising were very impressive through Q3 last year.  After a rocky first half, revenues were up slightly, with a 5.4% drop in revenues y-o-y by the fourth quarter – vastly superior results to traditional advertising, which in some sectors fell as much as 30%.

We’re still waiting for reliable figures for the Russian market, but we’d hold off on declaring a banner year – similar performance to the US in this sector would suggest incredible resilience, though, and is something to keep a close eye on.

AdWatch was purchased for $20 million in a 2008 private equity transaction by Aegis Group plc and is now part of the Isobar online advertising network.